TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates.

While plenty of high-yield opportunities exist, investors must always consider the safety of their dividend and the total return potential of their investment. It is not uncommon for a struggling company to suspend high-yielding dividends which could subsequently result in precipitous share price declines.

TheStreet Ratings' stock rating model views dividends favorably, but not so much that other factors are disregarded. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e. how much one is willing to risk in order to earn profits?; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to its stock's performance.

These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. As always, stock ratings should not be treated as gospel — rather, use them as a starting point for your own research.

The following pages contain our analysis of 3 stocks with substantial yields, that ultimately, we have rated "Hold."

Triangle Capital Corporation

Dividend Yield: 12.10%

Triangle Capital Corporation (NYSE: TCAP) shares currently have a dividend yield of 12.10%.

Triangle Capital Corporation is a business development company specializing in private equity and mezzanine investments. The company has a P/E ratio of 8.87.

The average volume for Triangle Capital Corporation has been 162,300 shares per day over the past 30 days. Triangle Capital Corporation has a market cap of $593.2 million and is part of the financial services industry. Shares are down 13.7% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Triangle Capital Corporation as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:
  • TCAP's revenue growth has slightly outpaced the industry average of 6.9%. Since the same quarter one year prior, revenues rose by 11.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The gross profit margin for TRIANGLE CAPITAL CORP is currently very high, coming in at 84.48%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 43.75% significantly outperformed against the industry average.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, TRIANGLE CAPITAL CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 27.75%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 57.47% compared to the year-earlier quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.

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KCAP Financial

Dividend Yield: 16.40%

KCAP Financial (NASDAQ: KCAP) shares currently have a dividend yield of 16.40%.

KCAP Financial, Inc. is a private equity and venture capital firm specializing in mid market, buyouts, and mezzanine investments. It focuses on mature and middle market companies. The company has a P/E ratio of 23.27.

The average volume for KCAP Financial has been 196,700 shares per day over the past 30 days. KCAP Financial has a market cap of $189.7 million and is part of the financial services industry. Shares are down 25.1% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates KCAP Financial as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity.

Highlights from the ratings report include:
  • KCAP's revenue growth has slightly outpaced the industry average of 6.9%. Since the same quarter one year prior, revenues rose by 14.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has significantly increased by 127.72% to $13.70 million when compared to the same quarter last year. In addition, KCAP FINANCIAL INC has also vastly surpassed the industry average cash flow growth rate of -410.93%.
  • The gross profit margin for KCAP FINANCIAL INC is currently very high, coming in at 78.99%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 11.03% trails the industry average.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Capital Markets industry and the overall market, KCAP FINANCIAL INC's return on equity is below that of both the industry average and the S&P 500.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 32.21%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 91.17% compared to the year-earlier quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.

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Pennant Park Investment Corporation

Dividend Yield: 15.90%

Pennant Park Investment Corporation (NASDAQ: PNNT) shares currently have a dividend yield of 15.90%.

PennantPark Investment Corporation is a publicly listed business development firm specializing in direct and mezzanine investments in middle market companies. It invests in the form of mezzanine debt, senior secured loans, and equity investments. The company has a P/E ratio of 4.25.

The average volume for Pennant Park Investment Corporation has been 475,500 shares per day over the past 30 days. Pennant Park Investment Corporation has a market cap of $523.5 million and is part of the financial services industry. Shares are down 25.1% year-to-date as of the close of trading on Thursday.

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TheStreet Ratings rates Pennant Park Investment Corporation as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.

Highlights from the ratings report include:
  • PNNT's revenue growth has slightly outpaced the industry average of 6.9%. Since the same quarter one year prior, revenues rose by 14.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The gross profit margin for PENNANTPARK INVESTMENT CORP is rather high; currently it is at 67.10%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 12.14% trails the industry average.
  • PENNANTPARK INVESTMENT CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, PENNANTPARK INVESTMENT CORP increased its bottom line by earning $1.66 versus $1.39 in the prior year. For the next year, the market is expecting a contraction of 33.7% in earnings ($1.10 versus $1.66).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Capital Markets industry. The net income has significantly decreased by 84.5% when compared to the same quarter one year ago, falling from $31.95 million to $4.94 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Capital Markets industry and the overall market, PENNANTPARK INVESTMENT CORP's return on equity significantly trails that of both the industry average and the S&P 500.

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